Greece

Yesterday’s European Banking Authority (EBA) stress test was supposed to restore confidence in the euro and Europe’s beleaguered financial institutions; it has had the opposite effect. Investors and market analysts are preparing for ‘Black Monday’ after only 8 banks failed the test and must now raise £2.2 billion between them to stave off ruin. A respected estimate by Goldman Sachs expected at least 15 banks to fail, requiring £29 billion to recapitalise. As the Spectator’s business blog reported yesterday, analysts feared that the EBA’s test would not be sufficiently stringent, and so it came to pass. The findings have served only to undermine confidence in institutions across the continent, many of

If you strain your ears, and listen very carefully above the din of the phone hacking scandal, then you may just hear Nick Clegg’s voice wafting across the Channel from Paris. Our Deputy Prime Minister is on the Continent today, delivering a speech that, in other circumstances, might have made more of a splash. This is, after all, a speech in which he stands up for the eurozone, and chastises those eurospectics — some of them within the coalition parties — who are eagerly anticipating its collapse. Or as he puts it himself: “A successful eurozone is essential for a prosperous UK. So there is no room for Schadenfreude here,

At a time when the Euro is looking so weak, it is a wonder that so many countries are still queuing up to join. Estonia has recently joined, while Hungary and Bulgaria are keen as mustard to join as well. Make no mistake, these countries want to join. They go to lengths to stay for two years in the European Exchange Rate Mechanism, while keeping inflation inline with the EU average. At a meeting this morning, the Hungarian foreign minister capped off his country¹s EU Presidency by declaring that Hungary is still focused on joining. But, even if these countries did not want to join the Euro, or felt perhaps

The Harvard economist Martin Feldstein proposes an intriguing solution to Greece’s problems in his latest column: “A temporary leave of absence from the eurozone would allow Greece to achieve a price-level decline relative to other eurozone countries, and would make it easier to adjust the relative price level if Greek wages cannot be limited. The Maastricht treaty explicitly prohibits a eurozone country from leaving the euro, but says nothing about a temporary leave of absence (and therefore doesn’t prohibit one). It is time for Greece, other eurozone members, and the European Commission to start thinking seriously about that option.” Where Feldstein is surely right is that Greece can’t get out

As Obama and Cameron played table tennis yesterday, a considerably more furious game was being waged between the government and Tory backbenchers. It related to a Parliamentary motion tabled by Mark Reckless – and described here – that sought to stem UK involvement in any future bailouts for eurozone countries. All well and good, you’d think, until a rival amendment percolated down from on high to dilute Reckless’s proposals. This new amendment would only go so far as to “urge the Government to raise the issue of the [bailout mechanism] at the next meeting of the Council of Ministers of the European Council”. The green benches were set for a

Financial meltdown. As Ben Brogan says this morning, it tends to concentrate the mind. And so it is with the coalition, after days of infighting and spiteful diversion. The meltdown is not our own, of course, but that of the Greeks. And although much will be said by Conservative and Liberal Democrat politicians about how “there, but for the grace of George Osborne,” etc., the real issue for them is simply this: how much are we in for? If Greece requires another bail-out, how much British money might be involved? Osborne himself – speaking across the news channels yesterday – has set out out a firm line. “We certainly don’t

As if the budget and Libya weren’t enough, the UK Government woke up today with another major challenge on its hands – yet another flare-up in the eurozone debt crisis, which has been continuing to bubble away under the radar.   Yesterday, Portugal’s Prime Minister José Sócrates literally walked out of Parliament, during a debate on EU-backed austerity measures. The austerity package was subsequently voted down and shortly afterwards Sócrates announced his resignation. Portugal is now facing the prospect of being without a government for months, as its electoral rules require a 55 day break between the dissolution of Parliament and new elections.   The episode has increased the already

Cuts are here. The most important news of the weekend was the G20’s official backing for spending cuts. It was a significant volte face, and doubtless the sight of violent uprisings in Greece concentrated minds. Finally, George Osborne has been vindicated; but having convinced finance ministers, he must now carry the coalition and the country with him. The first thing to do is ignore Nick Clegg and his claim that cuts will not be savage. Cuts will re-configure government in Britain, the current invasive Leviathan will be dismantled; but the process will be painful in the short-term, it must be. Osborne has been influenced by the Canadian model, which turned

Recent events in the Eurozone have led a number of commentators to suggest that we are nearing some repeat of the financial crisis that followed the nationalisation of Fannie Mae and Freddie Mac in August 2008 and the subsequent (and consequent) bankruptcy of Lehman’s. In my view, the current situation is rather different from that in 2008, but matters could turn out much worse. Our situation is not like 2008 (yet) because: – not such a high proportion of AAA securities has been reduced to junk status – there are now slightly more robust resolution regimes in place for banks – banks have a bit more liquidity – US and

Angela Merkel’s fall from favour is something David Cameron ought to bear in mind as he looks for lessons to guide his term in office. The German chancellor could do no wrong when she was first elected. A new “Iron Lady”, she was seen as a giant among pygmees. Tony Blair was leaving the scene, Nicolas Sarkozy had yet to be elected, the newspapers swooned, the voters applauded. Mrs Merkel was respected in the US and Europe. She made her unwieldy coalition with the Social Democrats work, almost singlehandedly picked the NATO secretary-general and ruled over EU meetings. Now, EU commission president Jose Manuel Barrosso is (rightly) calling her “naïve”